A tide of flood insurance rate increases is rolling in, despite
the efforts of state and federal legislators to stem it in
waterlogged areas, with 25 percent hikes in the offing beginning
Oct. 1, 2013. The nonprofit consumer group United Policyholders,
which provides insurance advice to homeowners and businesses,
offers two pieces of advice:
- If you have flood insurance,
let it l
- If you need flood insurance,
Congress passed the Biggert-Waters Flood Insurance Act of 2012
to put the National Flood Insurance Program (NFIP) on sound
financial footing. The NFIP is $26 billionin debt from paying off
disaster claims such as those for the most expensive hurricane in
history, Katrina in 2005.
Subsidies for homeowners and businesses are being squeezed out,
and premiums up to
$31,000 a year
loom for those who don't raise their homes on stilts.
The act had broad bipartisan support until Superstorm Sandy hit
in late 2012.
"Its aftermath changed the way some U.S. House and Senate
members viewed the new law," says Michael Barry of the Insurance
Support for Biggert-Waters is eroding fast as influential East
Coast legislators realize just how much coastal residents are going
to pay for insurance policies from this federally sponsored
New York Times
story reported that one retired Queens firefighter who used to pay
less than $500 for flood insurance will now pay as much as $15,000
"Coastal residents are justifiably panicking about the economic
tsunami that is scheduled to crash down on them when Biggert-Waters
fully kicks in," warns Amy Bach, the executive director of United
On Sept. 18, 2013, the Committee on Banking, Housing and Urban
Affairs Subcommittee on Economic Policy will hold a hearing to
assess the act's viability.
No way out
"The bind is impossible," says Bach. "Your mortgage lender makes
you buy flood insurance [if you live in a flood zone], but you
won't be able to afford it. And you can't sell your home because no
buyer wants the yoke of that insurance price tag."
Bach isn't the only one who understands the dilemma. Groups all
over the country, such as the Coalition for Sustainable Flood
Insurance, are demanding that the Federal Emergency Management
Agency (FEMA), which runs the flood insurance program, produce a
promised "affordability study" to show how prices can be raised
without driving residents away.
Another demand: FEMA must produce accurate and current flood
maps to explain what residents of low-lying areas need to do to get
reasonably priced insurance, hopefully
they undertake the expense of rebuilding.
Flood insurance football
These demands have resonated in Congress, where leaders from New
Jersey's Sen. Robert Menendez to Louisiana's Mary Landrieu have
demanded delays in the NFIP rate hikes. Even New York City Mayor
Mike Bloomberg is advocating changes to make flood insurance more
But other lobbying groups, like the Taxpayers for Common Sense,
are insisting that the rate hikes go through to prevent further
"beachfront bailouts" of million-dollar homes. Inland congressmen
such as Pennsylvania Sen. Pat Toomey have been able to beat down
The Biggert-Waters law itself doesn't help much when it comes to
understanding the future cost of flood insurance. While FEMA claims
that "only 5 percent" of all flood policies will see those massive
increases, the Associated Press says the number affected will be in
the "hundreds of thousands," including many lower-income residents
in Florida and Louisiana.
The act also includes acronyms and jargon such as Special Flood
Hazard Area (SFHA), Base Flood Elevation (BFE) and Flood Insurance
Rate Map (FIRM) that are difficult for the average homeowner to
understand, partly because each flood-prone area is unique.
FEMA's advice: Get an elevation certificate, which can cost
about $700 per home, and then talk to your insurance agent. Private
insurance companies that sell flood insurance keep about 30 percent
of the premium but are not responsible for paying a claim. NFIP
pays the claims.
Flood insurance chaos
In surveying this "chaos," Bach and United Policyholders suggest
a buy and hold strategy. If you have flood insurance,
give it up. A "grandfathering" provision in the law allows
homeowners who maintain continuous coverage to use data from
previous flood maps, which aren't so stringent. FEMA says the new
maps will be phased in over five years.
But every flood insurance policy ends when a home is sold, and
the new -- and higher -- cost for flood insurance starts
As for buying flood insurance
, Bach, like a lot of others, is gambling that federal legislators
will want to avoid the anger of constituents who face the prospect
of losing their homes due to high insurance costs. She hopes for a
"last-minute partial repeal and [or] some other lifesaver that will
be tossed to home and business owners."
But any reprieve for flood insurance, which is leaking millions
in cash every year, will be only temporary. In other words, later
could be too late.